Usually referred to as the "Oracle of Omaha" because he hails from Nebraska, Warren Buffett, the world recognized as the most prominent investor in undervalued assets. Due to its ability to identify undervalued companies and buy them on the cheap, Buffett during his fifty-year career has made many people very rich. Its share in the company "Berkshire Hathaway" is 38%, giving him a net worth more than $ 32 billion and makes one of the richest people in the world (second only to Bill Gates). He is also one of the few who have earned such an impressive state exclusively through investment in stock market.
Buffett saw the error of investing in the University of Nebraska, where he read the book by Benjamin Graham "Intelligent Investor". Book Graham advised investors to look for stocks that traded well below their actual value, which provides a margin of safety.
Buffett fully explores the business and bought it only for impaired prices. This practice, which was essentially invented and defined by Graham, gives him the so-called "margin of safety for all its investments. This margin is the difference between the true value of business and the price of its shares.
Buffett invests in companies with superior economic characteristics, which are managed successful, highly qualified management teams. He also looks for companies with long histories of income growth above average. And unlike many other investors, Buffett does not pay attention to the fluctuations in the stock market, macroeconomic and market predictions. Instead, he simply maintains its long-term investment plan. While the fundamentals of the company do not change, Buffett will not sell it - even during the economic crisis.
Here are some other characteristics that Mr. Buffett considers when evaluating investment opportunities.
Easy to understand the types of business
One of the principles of Warren Buffett is not much different from the principles of Peter Lynch - work so that you understand and choose investments with whom you feel comfortable. Buffett, arguably one of the greatest and most respected investors of all time, carefully selecting stocks, said that investors should not complicate things, looking for sophisticated company.
Following this strategy, the safest an investor holding "Berkshire Hathaway" in the side of the fast-growing high-tech shares. Buffett admits that he does not understand quite well the high-tech business. Also, it avoids the industry as a whole. Before investing in any business, Buffett is trying to predict that the company will consist of a future in 10 years. The high-tech markets change too quickly to treat them so far with some certainty.
High return on assets
Buffett stressed that the return on assets is a key measure of profitability of the company. He prefers to invest in companies where it can confidently predict future revenues, at least 10 years. He especially likes companies that do not require large capital investment, because they tend to produce much higher returns on assets. Constant stream of cash Buffett also looks for companies with substantial free cash flow. Always mindful of the risks associated with investing, he ensures that his company is enough money to invest in their growth after they paid the bills.
Limiting debt
In the 1990's, Buffett bought the insurance company "Geico" and "General Re", because he liked the company to restrict and manage your debt.
Buffett also liked the "floating money", which assumed the insurance business. Policyholders pay premiums in advance, and payments for claims occurring later, thus, the insurance companies there is a steady stream of cheap cash that can be used. And who better than himself directly Buffett, will invest the money?
Quality Management
Among the most notable aspects of stock selection Buffett is that he is looking for quality companies with quality management teams. When Buffett buys a business, he buys and its management. Buffett is looking for people who are just as enthusiastic of their business, as he himself investing.
* During 2002, we entered the foreign exchange market for the first time in my life. In 2003 we increased our position, as I became more and more bear-set against the dollar, "said Buffett. He made it clear that he is not comfortable enough to feel personally or professionally, while working on the foreign exchange market. He explained that the trade deficit would frighten him. He noted that "Berkshire Hathaway" holds approximately 12 billion U.S. dollars in foreign exchange contracts, in five unspecified currencies. He also said that "Berkshire Hathaway" has a high yield bonds denominated in Euro of approximately $ 1 billion.
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